PSX gears up to launch two exchange-traded funds

Funds to provide investors opportunity to buy and sell multiple stocks in form of units

KARACHI: Pakistan Stock Exchange (PSX) has announced to launch the much-awaited two exchange-traded funds (ETFs) - a basket of multiple shares each whose units would be available for online trade like shares - on Tuesday (March 24).

The state-owned asset management company (AMC) the National Investment Trust (NIT) and an AMC in the private sector the UBL Fund would launch the ETFs at a face value of Rs10 per unit next week. Investors could buy or sell their units in 500 lots.

When the PSX officials were asked whether this is a suitable time to launch the EFTs considering the coronavirus concerns, they replied that the stock market and the domestic economy both have continued to remain operational. “The ETFs are being launched at a time when the market is offering a massive discount,” an official said.

The PSX would keep updating the net asset value (NAV) of the underlying assets in the EFTs every 15 seconds on its online trading software. This would help investors make intelligent decisions to buy or sell the units at a face value starting from Rs10 per unit. The units may move either 7.5% upside or downside from pre-opening price every day, as these are the new limits for all the individual stocks listed at the PSX.

The NIT Pakistan Gateway Exchange Fund (NITG-ETF) has as many as 12 notable stocks in its basket. The constituents are nine in the UBL Pakistan Enterprise Exchange Traded Fund (UBLP-ETF), according to a PSX notification.

The two ETFs have seven stocks in common from the sectors including bank, power, fertiliser, and cement. Besides, NIT has additional three stocks from the oil sector.

“The only major difference between the two ETFs is of stocks from the oil sector,” another official clarified.

Those, who would find the oil and gas exploration stocks attractive in addition to the other eight stocks, may opt to buy NITG-ETF units. But those, who would find the energy stock risky, may opt to buy UBLP-ETF units, he added. The ETFs are very much similar to open-end mutual funds. The funds would provide opportunities to investors - especially to small investors - to buy and sell multiple big stocks in the form of their units.

Moreover, the ETFs are expected to generate volumes, as the diversified stocks in the ETFs portfolio help investors mitigate risk factors. The two ETFs would announce cash dividends as well.

Four other AMCs are also working to launch another four ETFs. However, it is very much difficult at this point when they would introduce the new funds at PSX. The PSX index plunged over 8,000 points, or 21%, over the past nine-trading sessions to around 30,000 points by Thursday (Mar 19) in response to the virus-led economic mess-up in the world.

Published in The Express Tribune, March 22^nd, 2020.

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